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Leighton defends silence on bribe allegations

Jenny Wiggins

Leighton’s shares remained well under previous trading levels until last month when the stock started rising ahead of a $1.15 billion takeover bid.

Leighton Holdings has defended its decision not to publicly release information on alleged bribes paid by former executives to secure contracts in Iraq, arguing the information was ''insufficiently definite'' to be disclosed.

In its defence to a class action lawsuit filed by Melbourne City Investments in Victoria's Supreme Court, Leighton claimed it did not need to publicly disclose details of a handwritten memo by former chief executive David Stewart because the information was not expected ''to have a material effect on the price or value'' of its stock.

Leighton's shares tumbled more than 10 per cent from $19.58 to $17.54 on October 3, 2013, wiping almost $1 billion of its market capitalisation, after Fairfax Media reported some of the contractor's former executives had allegedly been aware of a $42 million kickback paid to a Monaco-based company, Unaoil, to secure an oil pipeline contract in Iraq.

Leighton's shares remained well under previous trading levels until last month when the stock started rising on March 6 ahead of a $1.15 billion takeover bid - priced at $22.15 a share - by controlling shareholder Hochtief. The bid was formally announced on March 10.

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Melbourne City Investments (MCI), which is owned by former Minter Ellison partner Mark Elliott, alleges Leighton breached continuous disclosure laws by not providing more information about the alleged Unaoil bribe before October 3, 2013.

Fairfax Media revealed on October 3, 2013, the existence of a memo handwritten on November 23, 2010, by Mr Stewart, which said Leighton International's managing director, David Savage, had disclosed during a meeting that he knew of the kickback. According to the note, Mr Savage also claimed that former CEO Wal King was aware of the alleged kickback. Mr King has strongly denied any knowledge of bribery and is currently suing Fairfax Media for defamation in relation to the claims.

The only public reference by Leighton to the alleged kickbacks before October 3, 2013, was a press release on February 13, 2012, stating the company had referred a ''possible breach'' of its code of ethics related to payments made by its subsidiary Leighton Offshore to the Australian Federal Police.

In its defence to MCI's lawsuit, Leighton acknowledged that Mr Stewart had prepared a handwritten note named ''Iraq Project Discussion File Note'' and that the company had the note from about November 23, 2010.

Leighton, which is being represented by law firm Allens, did not comment on the contents of Mr Stewart's note, arguing it would refer to the note's ''full terms and effect'' at trial.

But Leighton's former general counsel, Craig van der Laan, saw a copy of Mr Stewart's note on or about November 3, 2011, according to the defence filing.

Leighton gave a copy of the note to the AFP on November 7, 2011, and also provided the AFP with a draft announcement to the Australian Securities Exchange that was to be issued by the company ''in the event that any aspects of any investigation by the AFP became public''. Leighton claims it was told by the AFP that the police would be responsible for media inquiries or contact once the investigation had been fully referred to the police, according to the defence filing.

Mr van der Laan was informed by the AFP's Chris McDevitt in a letter dated November 9, 2011, that the police had assessed the initial information provided by the company, and that Leighton should treat the matter ''in the strictest confidence''. Leighton received a letter from the AFP on January 25, 2012, stating the information it had provided had been assessed by its Sydney office's operations committee and been moved to ''an active investigation''.

On June 20, 2013, Leighton was told by the AFP's Colin Hunt in an email that the investigation was continuing and the police anticipated their investigation ''would not be completed in the near future''.

MCI has amended its original claim twice. Leighton has until April 24 to respond to the most recent amendments. MCI then plans to request discovery of relevant documents.

MCI, which has sued several companies including WorleyParsons, bought 39 Leighton shares for $17.54 each on November 1, 2012.